OpenView falls short of target in tougher fundraising market

In what could be an omen for other VC fundraisers, OpenView Venture Partners has fallen short of the target for its seventh fund.

The 17-year-old Boston firm, which invests in business software companies, closed on $570 million for OpenView Venture Partners VII. While the new vehicle is 27 percent bigger than its predecessor, it still couldn’t meet its target of $800 million, as stated in an SEC filing.

Fundraising was expected to get more difficult this year as the tech sector has cooled and exits for VC-backed companies have nearly ground to a halt. Investors that participated in Venture Capital Journal’s LP Perspectives 2023 Study had a much more negative outlook about VC than in previous years.

Many LPs are finding their portfolios over-allocated to private equity and have seen a sharp drop in distributions, leading a growing number of public pensions to reduce or slow their commitment pace. At least two pensions that invested in OpenView’s Fund VI reduced the size of their commitments for Fund VII. Texas County and District Retirement System committed $30 million to Fund VII, down from $50 million for Fund VI, while Florida Retirement System Trust Fund committed $20 million, which was $10 million less than its commitment for Fund VI, according to the funds database of affiliate title Buyouts.

An OpenView partner was not immediately available for comment, but the firm said in an email to Venture Capital Journal: “We determine the size of each fund by conducting a bottoms-up analysis that takes into consideration the average deal pacing we expect per partner per year, the number of partners, our average investment size and the time we would like to have in between fundraises (two to three years). The analysis of these variables is how we set our hard-cap on the fund. In these changing market conditions, we are very confident that the $570 million amount will allow us to meet the same pacing and portfolio goals we set out to achieve at the onset of the fundraising process.”

OpenView set an ambitious target for Fund VII, aiming for a nearly 80 percent increase from Fund VI, which closed in October 2020. None of the firm’s first five funds topped $300 million.

Fund VI had generated a TVPI of 0.97x and an IRR of -2.95 percent as of June 30, 2022, according to the Texas County and District Retirement System.

OpenView’s Fund V, which held a final close on $296.7 million in May 2018, had generated a TVPI of 3.39x and IRR of 52.3 percent as of June 30, 2022, according to the Florida Retirement System Trust Fund.

Fund IV, a 2014-vintage vehicle that raised $250 million, had produced a TVPI of 2.33x and IRR of 18.4 percent as of June 30, 2022, Florida Retirement reported.

Iris Dorbian contributed to this story